ESSENTIALS OF VALUE &7
Advertising may be necessary to find a market for the securities
whose sale is to furnish the money with which construction will
be undertaken. A commission may have to be paid to the agent
who buys the properties or who markets the securities. The
securities may have to be sold at a discount so that the in-
debtedness on which interest is paid may exceed the sum that
was actually required to construct and acquire all the essential
property. Promotion expense of this character does not usually
appear in any valuation, nor in the estimate of the investment,
though it may nevertheless have been an essential element of
cost. The necessity which may have compelled the incurrence
of a promotion expense may be deplored and yet it must be ad-
mitted that, on the whole, society has benefitted by the pro-
moters’ activity and by the carrying out of many enterprises
which were not at the outset so attractive that bonds based
thereon would sell at par or command a premium.
In this connection it may be noted that the Wisconsin R. R.
Commission holds that the cost of marketing bonds should be
taken into account as a promotion expense but that all discounts
do not necessarily become proper additions to physical value.
The appraiser whether of value or of the investment will
rarely be required to make a close estimate of the promotion ex-
pense, but the fact that under the prevailing conditions there
has generally been some legitimate promotion expense which
may not appear in the valuation, should not be overlooked when
rates are fixed.
Intangible Elements of Value
The Total Intangible Value. — Whenever the net return ex-
ceeds a fair interest rate on the capital invested in the physical
elements of any enterprise, there will be other elements of value
in the same, not represented by the cost of any physical portion
thereof. These values being apart from the actual investment
in physical properties are usually regarded as intangible values.
Ordinarily the sum of all intangible values will be the capitalized
net annual earnings, less the investment in the physical proper-
Ld
